Loans to illiterate persons: Execution of loan documents

Loans must be made available to illiterate customers as are offered to other customers. Their inability to read the contents of document and execution thereof should not be a criterion for sanctioning/denying a loan. As far as execution of documents there is no distinction under law, between a literate and illiterate person. Therefore, the requirements of a proper and valid execution of a document are same for both of them. The only difference is the thumb impression of the illiterate person is obtained with reference to the signature of the literate person on such documents. There is no specific rule for taking L.T.I /or R.T.I. All the same, normal practice is to obtain Left Thumb Impression (LTI) from men and Right Thumb Impression (RTI) from women. Below the thumb impressions obtained from the illiterate person/s, it should be mentioned that L.T.I (Left Thumb Impression) or R.T.I (Right Thumb Impression) of so and so (write the name of the person/s) as the case may be. It is also important to have a certificate as a part of the agreement that the contents were read and explained to the illiterate borrower/guarantor and the document executed on his/ her own will after understanding the contents of the agreement and terms and conditions of the limit sanctioned. This is in order to avoid any dispute to the awareness of the contents of the documents.

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Mr. Surendra Naik is a retired Chief Manager from Indian Overseas Bank and Founder, Chief Editor of www.bankingschool.co.in. He worked at IOB for three and half decades and specialized in Credit Appraisal & Forex.